Massive increases in flood cover insurance costs

The insurance company SGIO has defended massive increases in premiums for some of its customers in Western Australia.

SGIO has written to customers in the south west of the state, including Collie and Bunbury, to inform them their premiums will rise substantially because their homes are deemed to be at risk of flooding.

The insurer says the increase is designed to cover the risk of flooding after a new assessment showed the area was prone to flooding once in 100 years.

Collie pensioner May Hollins has told the ABC she is angry her premiums will rise from $830 to $3,300 a year.

SGIO says flood cover is being included in all home and contents insurance policies but only about 2.5 per cent of its customers around the state will be hit with the increased premiums.

SGIO's James Rickards says the increase applies to residents who live near rivers and estuaries.

"Just because an area hasn't flooded since say for example 1982 doesn't mean it won't," he said.

"Insurance is obviously about ensuring people have the right cover for the right event at the right time."

Mr Rickards acknowledges some residents may find the increase hard to meet.

"We can understand that it can be tough for the small amount of people who are living in areas that we've assessed are at a level of flood risk," he said.

Ms Hollins says her house is far away from the flood zone and should not attract a high risk premium.

She says she will not be able to pay the increased insurance costs.

The Member for Collie, Mick Murray, says SGIO is not the only company which has hiked up its charges.

He says insurers are trying to pay for the cost of natural disasters like the Queensland floods.

"I think they have just come out and tried to balance their books at the expense of the people that I know in the South West," he said.

"Remembering that, on top of electricity prices, water prices, now insurance is going to make it very difficult for seniors to exist in their own homes."

Mr Murray says SGIO needs to review its flood cover in the South West.

"Certainly it is one of the things that SGIO should come back and have a look at," he said.

"The impost on people in this region for the flood insurance is far higher than anyone else."